Shipping Costs As Qualified Expenses

December 21, 2010

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Film production companies should be aware of how shipping costs are treated according to the film production incentive program of the given state they are shooting in. Depending on the shipping arrangement, the costs may or may not be considered a qualified expense.

For example, under Massachusetts law, an expense qualifies only if it was “clearly and convincingly” incurred in the Commonwealth. Shipping costs are disallowed if a film studio advises their vendor to ship items to Massachusetts using the studio’s account with UPS or Federal Express. The reason is that through this method, the shipping costs become a separate expense incurred by the studio at the place where the shipment originates out of state. However, the costs likely would have been allowed if the vendor had charged the studio directly for the shipping.

To have shipping costs qualify for the film production incentive in a given state, it would be advisable for the film studio to become familiar with the state’s rules and ask the vendor to charge shipping on the item to the studio directly.

The material contained in this presentation is for general information and should not be acted upon without prior professional consultation.

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